Imagine if you built your house with the expectation that you and your spouse were going to have two children. A modest rambler with three bedrooms and two bathrooms seemed like the perfect size. But, ah, the best laid plans of mice and men... You end up having six children. When your family was at four kids, you just doubled up the kids in the bedrooms. The two-bathroom situation proved problematic, but you managed to make it work with a tweak to your schedules and some creative juggling.
However, once you were up to six kids, the bedroom and bathroom arrangements just weren't working. Nevermind the kitchen and the refrigerator size. And we won't even talk about what is going to happen when half of them are teenagers and looking to borrow a car at the same time. Certainly, with the bigger-than-expected family, you needed to redesign your living space by either buying a bigger house or adding on to your existing house. As the kids go off to college or move out, you could close off various bedrooms or convert them into something that suits your current needs, such as a home office or a wine cellar.
In Transition
The Postal Service is going through a similar transition. Its processing and transportation network was built to handle a different mail mix from what we have today. Single-piece First-Class mail volume has declined for most of the past decade. This means there are fewer cancellations and less processing at originating processing centers. The worksharing program has thrived, with more than $15.2 billion in costs avoided for the Postal Service. Much of this workshared mail bypasses originating postal operations and is initially processed on automation equipment at destinating network facilities. In addition, Standard mail volume now exceeds First-Class mail, so the proportion of mail drop shipped downstream in the postal network continues to increase.
Postal officials have said that the current mail-processing network reflects decisions made decades ago for a mail mix that is no longer relevant. The network is fraught with redundancy and operational flexibility is limited. This, in a nutshell, is why the Postal Service has begun to redesign its network.
The Master Plan
The USPS calls the plan Evolutionary Network Development (END), and the process will move the Postal Service to a more flexible processing and transportation system. In February, the Postal Service filed with the Postal Rate Commission (PRC) a request for an advisory opinion on changes in the application of current service standards to many three-digit ZIP Code service area pairs. The changes, which could affect numerous origin-destination three-digit ZIP Code pairs for different classes of mail, are expected to result from the USPS' system-wide review and realignment of its mail processing and transportation networks.
Mailers have applauded the Postal Service's decision to go public with its network realignment plan and open a better line of communication with all affected parties. One reason the industry is so supportive of the USPS' plan to "right-size" the postal system is that it recognizes that the Postal Service has a compelling rationale and a deliberate strategy for realigning its network. Mailers recognize not only the need for realigning the network but the dangers of not doing so. As Postal Service officials explain, the real cost savings come from improved efficiencies and economies of scale, not necessarily from shutting down facilities. The flip side, of course, is that an inefficient network adds costs to the postal system, which mailers bear through higher postage rates.
The reasons, strategy and vision for realigning the network have been stressed in recent presentations made by Paul Vogel, the Postal Service's Vice President of Network Operations. The objectives of the USPS' network redesign are to eliminate multiple product networks, create shape-based networks that are flexible, redefine the roles and functions of plants and standardize mail processing and transportation networks. Vogel says the USPS wants a more flexible network to accommodate industry growth with more demand on the Postal Service at specific points in the network and to accommodate changing economies.
The Postal Service will transition to a simpler network using the Area Mail Processing (AMP) guidelines when consolidations will result in changes to three-digit First-Class mail operations. It will apply similar principles when making other network changes not covered by the AMP process. The AMP review is a process used by postal management to consider site-specific proposals to consolidate all originating and/or destinating distribution operations from one or more postal facilities into other automated and/or mechanized facilities in order to improve operational efficiency or service.
Vogel explains that there are three types of AMPs: Saturday, partial and full AMPs. At the time of this writing, the USPS has 10 AMPs in progress, and it has announced plans to move forward on another 41 studies. The nine types of facilities now in operation will transition to a future system of five different types of facilities, as shown here:
CURRENT NETWORK
FUTURE NETWORK
Regional distribution centers would perform all parcel and bundle processing of all mail classes using state-of-the art processing equipment (the Automated Package Processing System), serve as transportation hubs and act as warehouse-like environments. They would not necessarily contain the Flats Sequencing Systems (FSS).
Local processing centers would handle origin and destination processing of single-piece letters, magazines and also catalogs. This includes processing both outgoing and incoming primary and secondary sorts as well as delivery point sequencing (DPS) of letters and flats sequencing. These facilities would do what a processing and distribution center does now. However, with single-piece, First-Class volume declining, there would be a need for fewer of these facilities. With fewer of these types of facilities, security and efficiency would improve.
Destination processing centers would handle destination processing of single-piece letters and flats, DPS and flats sequencing. USPS expects there would be more destination processing centers than local processing centers, as it is likely this is where most mailers would enter their mail. These facilities would be closest to the carrier in a redesigned network. They will contain FSS machines and DPS letter equipment.
Destination delivery units would still exist as they do today, but it's likely there would be fewer of them. Mailers could enter mail at each of the above locations.
Vogel has described the regional distribution centers (RDC) as the hub of the hub-and-spoke concept. The USPS expects it would need about 70 of them and intends to convert its 21 bulk mail centers (BMC) into RDCs. The BMCs are solid facilities in prime locations where USPS is considered a good neighbor. However, they will need to be cleaned out and retrofitted, something that can't be done with employees working there. Temporary locations will be used to process the mail during renovations of the BMCs.
The END Message
The overall END message resonates with mailers even if they aren't thrilled with the acronym. They understand the need for ongoing changes of the postal system, and they will continue to work in partnership with the Postal Service. They stress the need for open and frequent communication, especially as there could be short-term effects on service and issues surrounding containerization and mail preparation that need to be considered. "Controlling postal costs is critical to the health of the mailing industry and we are very supportive of the Postal Service's network consolidation efforts," says Jim O'Brien, Vice President, Distribution and Postal Affairs for Time Inc. and Chairman of PostCom. "We're also cautiously optimistic that the network changes can be made without having a negative impact upon service."
In addition, an open communications strategy allows the larger stakeholder community the American people to better understand why the Postal Service is moving forward with a plan to change its network. The rationale is simple: the USPS must reshape its network to ensure a viable postal system for future generations.
Kate Muth is Vice President of the Association for Postal Commerce. You can reach her at kmuth@postcom.org or 703-524-0096.
